Direct Tax: An Overview
Direct taxes are usually collected from individuals or organisations and paid directly to an oppressive institution, like the government of India, based on an individual's income and wealth. This type of tax cannot be transferred to another person or entity for a refund by the in-question person or company. Wealth tax and income tax are two instances of direct taxes.
Residents of India are subject to both direct and indirect taxes from the Indian government. Direct taxes, such as income tax, cannot be transferred to another person; instead, each person is responsible for paying them directly to the Indian government. Direct and indirect taxes both play important roles and are crucial components.
Types of Direct Tax in India
Income Tax
Income tax is a fee that must be paid, depending on an individual's age and income. The amount of income tax that must be paid is decided by the Government of India's various tax slabs. Every year, the taxpayer is required to submit income tax return (ITR). Depending on their ITR, individuals can be eligible for a refund or might have to pay taxes. People who fail to file an ITR face severe consequences.
Wealth Tax
This yearly payment is based on the ownership of the real estate and the property's market value. Regardless of whether a person's property produces an income or not, wealth tax must be paid if they own it. Depending on where they live, corporations, Hindu Undivided Families (HUFs), and private taxpayers all have to pay wealth tax. Assets like gold deposit bonds, stock holdings, residential property, commercial property rented for more than 300 days, and residential property used for a business or profession are excluded from paying wealth tax.
Estate Tax
Often known as inheritance tax is paid based on the number of assets a decedent leaves behind after passing away.
Corporate Tax
Domestic businesses must pay corporate tax, excluding shareholders. Foreign businesses that earn money in India must also pay corporate tax. Income that is based in India and is derived from the sale of assets, technical service fees, dividends, royalties, or interest is taxable. The types of corporate tax include Minimum Alternative Tax (MAT), Fringe Benefits Tax (FBT), Dividend Distribution Tax (DDT), and Securities Transaction Tax (STT).
Common Documents Required for Direct Tax
- Photocopy of PAN card
- Copy of Aadhar Card
- Bank account number with IFSC
- TDS (Tax Deducted at Source) certificates like Form 16, 26AS, 16A, etc.
- Tax payment challan for self-assessment or advance tax returned by you.
FAQs on Direct Tax in India
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